Infrastructure Investments under Pillar Two: A Substitute for Tax Payments?

Governments often offer tax incentives to multinational enterprises to encourage the development of large infrastructure projects, creating a mutually beneficial arrangement that fosters investment and economic growth. However, the introduction of the OECD’s Pillar Two framework and subsequent implementation of legislation in many countries, which mandates a global minimum tax rate of 15%, has placed these tax incentives under scrutiny. This article explores whether infrastructure investments could be classified as a substitute for tax payments under the new Pillar Two rules. Through practical examples and analysis, the authors examine the challenges and opportunities for businesses navigating this shifting landscape, offering insights into how multinational enterprises can align their strategies to meet compliance while continuing to support infrastructure development in host countries.